Evan Greenberg Receives Award from Insurance Federation of New York; Provides Commentary on Industry Regulation
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| Evan Greenberg (c) and his father, Hank (r), with Insurance Federation of New York President Nick Pearson. |
ACE Chairman and CEO Evan Greenberg received the Free Enterprise Award from the Insurance Federation of New York on November 15 at its 99th annual award luncheon in New York.
The award was presented by his father, Hank, who received the award 34 years ago.
“I am honored to be accepting this year’s Free Enterprise Award. I am touched and truly grateful,” said Mr. Greenberg. “I view this award as recognition not just for individual accomplishment but, importantly, for collective accomplishment. So many of my colleagues whom I witness day in and day out are deserving of such recognition. As such, I want to thank the Insurance Federation of NY on behalf of my company, ACE, and our nearly 20,000 employees around the globe.”
In his acceptance remarks, Mr. Greenberg also noted several regulatory challenges facing the insurance industry. The following is an excerpt of those remarks.
“Our industry faces a difficult, politically-charged regulatory environment globally that is in a state of change following the financial crisis. It has never been more complex, demanding, and in my judgment, confused. It is one of the greatest challenges our industry faces today. In fact, it would be far more difficult to build ACE today in this environment.
“Many of the regulatory bodies we report to around the globe do a reasonably good job and have a reasonably clear sense of mission. On the other hand, some important regulators and policymaking bodies, particularly at the national and multilateral level, are confused about mission and the issues.
“At the leadership levels, they are directed by those with banking experience and very little knowledge of or appreciation for our industry, and the important differences. This is deeply troubling, and to illustrate my concerns, I have three specific items I am just going to briefly mention.
“First is the designation of certain large global insurance companies as systemically important. This designation, to the extent it impacts their traditional insurance business, in my judgment, is wrong-headed and simply not relevant. The failure of an insurance company engaged in traditional life or non-life insurance, while potentially a major event, does not pose a systemic threat to the global financial system.
“The notion of requiring insurers designated as systemically important to hold more capital than other insurers, again for traditional insurance business, makes little sense. It would needlessly disadvantage them and for what benefit?
“And to go further, and consider also requiring companies designated as internationally active insurance groups to hold more capital than other insurers, would be needlessly counterproductive. It would restrict fair competition, damage availability and raise cost. Who benefits and for what purpose?
“The second concern is around fundamentals related to global industry capital standards. I am all in favor of minimum standards for capital that a company must hold to protect policyholder obligations in the event of an insurer failure. However, a number of proposals being discussed are more like Solvency II and require levels of statutory capital well beyond that singular purpose.
“In debating capital standards, regulator proposals consider adopting accounting standards that don’t make sense to me from a statutory point of view. For example, the fair valuing of an insurer’s balance sheet based on market conditions at a moment in time makes little sense when we insurers are clearly long-term buy-and-hold investors with limited to no “run-on-the-bank” exposures.
“Another example is fair valuing P&C loss reserves to require discounting as if P&C cash flows are predictable. This would needlessly weaken insurer balance sheets.
“My third concern is legislative or regulatory efforts we see around the globe aimed at balkanizing capital and cross-border risk transfer flows. Behind these efforts are essentially two motivations:
“One is the desire of regulators to force an insurer to retain more risk and capital in their country in order to fully control the capital backing the exposure the insurer is assuming for its own account.
“And the other is protectionist – the desire to protect their own domestic insurance market at the expense of competition from global companies capable of assuming large amounts of risk at competitive prices.
“This is a concern right here in our own country. I refer you to the Neal bill, which would thoughtlessly limit intercompany reinsurance to advantage a few domestic insurers.
“There are consequences to these misguided efforts. Requiring global insurers to hold greater levels of capital locally will drive up prices and restrict the availability of capacity. Ironically, this is occurring as business continues to globalize with insured values and demand for coverage growing.
“These proposals single out and discriminate against foreign insurers. They violate existing tax treaties and trade agreements because their real aim is to restrict competition.
“They essentially threaten the very principle we are here today celebrating – free enterprise. And this would be to the detriment of society.
“In summary, our future depends on preserving the entrepreneurial and free enterprise spirit that encourages innovation. Our regulators have a role to play in supporting the freedom to build businesses and to innovate for the benefit of society in a responsible manner.”